The reform bill passed earlier this year stated that Florida auto insurance companies would have to cut personal injury protection (PIP) premiums by 10 percent when the law goes into full effect in 2013 and by 25 percent by 2014, or explain why the cuts weren’t possible. Those price drops would reflect insurers’ reductions in expenses that are to come from the reform.

According to the rate filings already approved by regulators, though, the PIP overhaul may be only reducing the size of rate increases—not cutting premiums overall.

Of the seven post-reform rate filings approved by regulators, only three reflect reductions in rates. One of those three already would have seen a reduction without the implementation of HB 119, and the other applies only to a collector vehicle program.

For the other four companies, PIP premiums could still be going up between 3.9 and 26.3 percent overall. These insurers still say the law did have a positive effect, indicating that the increases would have been significantly higher if it had not been for HB 119. The justified increases would have ranged between 15.4 and 60.9 percent in the absence of HB 119, they say.

“Although it initially appears the savings will result in a mitigation of rate increases rather than actual rate reductions for most companies,” said Florida insurance commisisoner Kevin McCarty, “it does represent a major shift in the trajectory of PIP insurance rates in Florida.”

Indicated Rates vs. Actual Rates

One important thing to note about the numbers released by the FLOIR is that they reflect the indicated rate change, which is basically the rate level the companies say they are justified in asking for, according to Jack McDermott, of the FLOIR communications office.

The actual rate changes that policyholders will see can vary from the indicated rate for two basic reasons, McDermott says:

1. There are discrepancies between insurers’ and regulators’ data projections. If the data leads to different conclusions, “the office can make adjustments to the indication.”

2. The company requests a rate that is different from the indicated rate. This could happen if the insurer realized that hiking rates by the maximum amount justified would price its coverage above competitors. It could ask for a lower rate to remain competitive.

Where Are the Savings Coming from?

According to the governor and legislators who were pushing through the reforms this past spring, most of the savings would be coming from stamping out fraud and abuse that are said to be rampant in the Florida car insurance system.

A report from Pinnacle Acturial Resources commissioned by the FLOIR, however, indicated that nearly all of the savings are likely to come from reductions in coverage provided by the average Florida insurance policy.

According to the report, the biggest influencers on costs are expected to be the limitation on non-emergency medical treatment under PIP and the exclusion of massage therapy and acupuncture.

Under the new non-emergency stipulation, only $2,500 of a PIP policy can go to treating medical conditions that are deemed “non-emergency.” Previously, drivers could invoke coverage up to their policy’s limits to treat any type of auto-related injury.

More Info to Come

The premium data reflected in the FLOIR’s announcement is only representative of a very small portion of the overall car insurance market.

As of Oct. 1, the FLOIR had received more than 100 rate filings that are supposed to reflect the anticipated savings from reforms. The seven mentioned in the report are only the ones that have been approved so far. The full picture will become clearer as more of those filings are approved.

About Ben Zitney

Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.